Insurance Terms & Concepts
How does NAIC distinguish MORAL hazard from MORALE hazard?
Answer
Moral hazard is personality characteristics that increase the probability of loss; morale hazard is the insured's negligence or disregard
NAIC: moral hazard means 'personality characteristics that increase probability of losses'; morale hazard means 'negligence or disregard on the part of the insured which could lead to probable loss.' Both are hazards — circumstances that increase the probability or severity of a loss.
Source: NAIC, Glossary of Insurance Terms
Not the answer
- They are two names for the same thing
- Moral hazard is a physical defect; morale hazard is dishonesty
- Moral hazard applies only to commercial risks
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